Residz Team 2 min read
You try telling new home buyers today that property markets rise and fall, but they won’t believe you. That is, until you show them this chart of changes in dwelling values from 1991 to 2021.
The chart is published in the Aussie Progress Report and titled Rolling annual change in CoreLogic Home Value Index of Australian dwelling values. (Source: Aussie Home Loans)
It shows the spike when COVID-19 made capital city homes unaffordable for 90 percent of workers as values rose to record highs and left many feeling the property blues in 2021.
It also shows the times home values fell, including at the very start of the pandemic when a recession was predicted (incorrectly, as it turned out).
Looking at all the ups and downs, what I don’t understand is why, when property prices are high, you get so used to it. It becomes easy to convince yourself they will stay high forever, doesn’t it? Right now, talk of a property price fall has felt, frankly, a bit unreal.
But if you were to give a third-grader this chart with instructions to “complete the pattern in the picture” they would get their sharpened pencil and immediately take the sticking-up line over and along a bit and then down, down, down.
I’m not suggesting third-graders would be correct (or keen to participate, for that matter) but it would be fascinating to see how their “predictions” would play out over the next few years. What we do know is that timing the market to pick the peak or trough is tough.
The chart shows clearly there have been “7 periods of ‘sustained increase at the national level’ and 7 periods of decline.”(Source: Aussie Home Loans) The report says the “peak-to-trough declines have on average lasted 12 months”, and “the value increases over the course of these cycles have an average length of 41 months.”
We could be seeing early signs of a ‘peak to trough decline’ but who knows? Even experts have been divided on how lumpy this purple patch will be for homeowners. Some suggest sales will wither, causing a property slowdown. Others think increased movement in the market might bring on a bonanza. As property expert Andrew Winter says, real estate is Australia’s favourite sport, so pull up a seat, grab your binoculars, and let’s compare scores next year!
Image: Rolling annual change in CoreLogic Home Value Index of Australian dwelling values. (Source: Aussie Home Loans, Aussie Progress Report)